Royal Bank of Scotland (RBS) said its turnaround plan is on track as the bank braced for a backlash from investors to a multi-million pound pay deal for its chief executive.

"Our businesses are shaping up and our recovery is clearly under way," RBS chairman Philip Hampton said at the part-nationalised bank's annual shareholder meeting. "We have made particular progress on reducing risk and refocusing the group . . . we are on track to meet our ambitious goals.

"I believe that in the next year or so we will finally prove that RBS has become the opportunity we know it can and must be," Mr Hampton said.

Most focus at the AGM was on a lucrative long-term pay deal for CEO Stephen Hester unveiled last month, which may see him get £7.7m (€8.7m).

Bonus

"I don't see why he should get a bonus when they're still making a loss," said private shareholder Tom Wilson before the AGM, held at the bank's campus-style headquarters on the outskirts of Edinburgh.

"The big concern for us is remuneration," said a top 25 investor in RBS, who asked not to be named. He predicted a shareholder backlash against the bank's plans to reward its senior staff, similar to events at oil major BP's AGM last week, when 11pc of voting shareholders disapproved of its pay plan.

"We have said to lots of companies recently: 'Show some restraint'. And particularly in a business that is not making any money, you have to ask where are the profits to pay the bonuses from? We're unhappy about that, and I think lots of people feel the same," the investor said.

Many investors and members of the public are angry that banks bailed out with taxpayers' money are paying millions to top staff while Britons grapple with below-inflation pay rises and harsh austerity measures.